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After the Close - The U.S. stock market got off to a decent start this morning, but sold off in the afternoon. At the close of the session, the Dow Jones Industrial Average was off 101 points (-0.8%); the broader S&P 500 Index was down 15 points (-1.1%); and the NASDAQ, which suffered the largest losses, surrendered  43 points (-1.4%). Market breadth was decidedly negative, as declining issues outweighed advancers by over 3 to 1 on the NYSE. All of the market sectors headed lower, with considerable weakness in the technology, capital goods, and consumer cyclical names. In contrast, there was some relative strength in the healthcare and utility stocks, as investors looked for some safety. Investors were also scooping up Government treasuries, pushing the yield on the 10-year note down to 1.68%. 

Technically, the S&P 500 Index had a large run over the past few months, and some selling is not totally unexpected. The Volatility Index (VIX), which can be used to measure investor sentiment, was up about 8.0% today, to just over 15. While this reading is still low, the move higher, suggests that concerns may be starting to surface.

Traders in the U.S. are still worried about the financial situation in Europe. The major bourses put in a choppy session, but managed to close in positive territory at the end of the day. Traders may have bothered by weak demand, and rising yields at a Spanish debt auction. Also, there still seems to be some disagreement about how the ECB should proceed with asset purchases.

Traders largely looked past a few decent economic reports issued this morning. Notably, the housing market recovery seems to be intact. The Case Schiller 20-City Index rose 1.6% for the month of July, which was better than some analysts had expected. Further, the FHFA Housing Price Index registered a slight increase in July, which comes after a good showing in June. In the broader economy, the consumer may be feeling better, as the Conference Board’s report on consumer confidence came in at 70.3 in September, which was far better than the figure that many had anticipated.

There were a few notable corporate reports released today. Carnival (CCL) shares were modestly higher, after the cruise operator released decent results. However, Paychex (PAYX) stock slipped, even though the payroll processor managed to exceed expectations. Also, Tesla Motors (TSLA) and Caterpillar (CAT -Free Caterpillar Stock Report) tempered their outlooks, sending both shares sharply lower. - Adam Rosner

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

 

12:00 PM EDT - As we opined in our market commentary yesterday, investors were likely to take their cues from a series of economic reports this week, and by the looks of trading this morning, they, indeed, did. As we approach the midday hour on the East Coast, all of the major U.S. equity indexes are in positive territory, with an assist coming from strong data on both consumer confidence and home selling prices. Overall, advancing issues hold a nice lead on decliners on both the Big Board and the NASDAQ.

The big news this morning came in the form of the Conference Board’s latest report on consumer confidence. Specifically, the New York-based research group said the Consumer Confidence Index, which had fallen in August, improved this month. The Index now stands at 70.3, up sharply from the 61.3 reading in August. In addition, the Expectations Index increased from 71.1 to 83.7. According to the Conference Board, consumers were more positive in their assessment of current conditions. Not surprisingly, consumer cyclical stocks got a boost from the latest consumer confidence data. However, they have not distinguished themselves from the pack, as nearly all of the top 10 sectors are sporting similar percentage gains. The one notable laggard is the industrials sector, which is being weighed down by a pessimistic outlook from Caterpillar (CAT - Free Caterpillar Stock Report) this morning. The blue-chip stock is also the biggest laggard among the Dow-30 stocks. In fact, shares of most of the 30 bellwether companies are in positive territory.

Investors also received some more positive news once again on the housing industry. The S&P/Case-Shiller Home Prices Indices, the leading measure of U.S. home prices, showed average home prices increased by 1.6% for the 20-City Composite in July. This decent report comes on the heels of last week’s positive data on existing home sales and housing starts and good quarterly reports from homebuilders KB Home (KBH) and Lennar (LEN) in recent days. Investors should also note that new home sales data for the month of August are due tomorrow at 10:00 A.M. (EDT)—a positive reading is the consensus expectation.

Meanwhile, as trading enters the final minutes on the Continent, the major European bourses are modestly higher after a generally lower start. Our sense is that those bourses will stay in their recent narrow tight trading ranges, as fears about an economic slowdown and the euro-zone’s debt crisis offset the European Central Bank’s stimulus measures. However, European investors could not like that Spain’s and Italy’s government bonds fell as demand declined when the two nations sold debt earlier today amid concern the region’s debt crisis is worsening. Meantime, Germany’s 10-year bonds rose for the second consecutive day after the International Monetary Fund said it will cut its forecast for global growth, underpinning demand for safer assets. Our sense is that such worries overseas may be a big reason why our central bank is aggressively supporting U.S. economic growth via a third installment of its bond-buying program, dubbed QE3.

Looking ahead to the remainder of the day, the economic news is in place to keep the bulls in the driver’s seat. However, we would not be too quick to write off some profit taking, as the worries about Europe are still very much in play and the market is overextended right now. The S&P 500 Volatility Index (or VIX) is still below 15, a level that would suggest that any disappointing news could spark at least a mild selloff. Thus, along with forthcoming U.S. economic news, the tidings from Europe could play a big part in trading over here in the coming days, especially with the commencement of third-quarter earnings season still a few weeks off. Stay tuned.  - William G. Ferguson 

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

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Stocks to Watch from The Survey There is some earnings-related news out today. Shares of Paychex (PAYX) are trading lower in the premarket, after the provider of computerized payroll-accounting services reported August-quarter results after the market closed yesterday. The stock of Tesla Motors (TSLA), an automaker best known for its sporty electric vehicles, is also indicating a lower opening this morning. The company cut its 2012 revenue guidance, due to a slower-than-expected rollout of its Model S sedan. Investors were also not overly excited by the long-term forecast offered by heavy-equipment maker Caterpillar (CATFree Caterpillar Stock Report), which calls for earnings between $12 and $18 a share on sales of $80 billion-$100 billion in 2015. The stock is trading modestly lower in the premarket. Finally, office supplies retailer Staples (SPLS) has announced restructuring plans that involve store closures, a sale of its European printing business, and other initiatives, all of which are likely to result in pre-tax charges to earnings. Investors’ reactions were muted, and the stock is little changed in the premarket. – Matthew E. Spencer

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

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Before The Bell - The stock market gave back some ground yesterday, but did so without any real conviction. In fact, after opening on a defensive note, with the Dow Jones Industrial Average and the tech-heavy NASDAQ at one time off by 57 points and 29 points, respectively, that pessimism soon eased. Indeed, in mid-afternoon, the Dow, boosted by strength in the healthcare sector, notably at drug behemoths Merck (MRKFree Merck Stock Report) and Pfizer (PFEFree Pfizer Stock Report), actually rallied into the plus column. Finally, though, pessimism got the better of the bulls and they succumbed to a resumption of the modest earlier profit taking. So by the close, the Dow had shed almost 21 points, which was still just a slight setback, and the NASDAQ had fallen by 19 points, a proportionately larger reversal.

Pulling the NASDAQ lower, on a light news day, was some profit taking in Apple (AAPL) shares. Preventing a bigger NASDAQ decline, though, was a strong gain in Google (GOOG) shares, which ascended the $750 level briefly before closing just shy of that rarified air. Elsewhere on the NASDAQ moves were incremental, as the bulls are still controlling the agenda. Indeed, they are seemingly doing so again this morning, as the U.S. equity futures are pressing notably higher with about a half hour to go before the start of the new trading day. In all, the S&P 500 Index futures are in the black by more than three points, while the NASDAQ futures are positive by more than 10 points, following generally lower sessions overseas. Overall, earlier today, Britain's FTSE 100 was more or less flat, while France's CAC-40 and Germany's DAX were modestly in the red.

Hurting the equity markets overseas once again are concerns about global economic growth. Specifically, most key metrics are still pointing to aggregate softness, notwithstanding efforts by the world's central banks to right their respective ships. China and Japan are slowing down, for example, while Europe is generally in recession. And over here, the news is largely uninspiring, save for the comeback now evolving on the housing front. And on that score, we will be getting a look at the Case-Shiller index of home prices for July today. Housing prices have been generally moving higher, and in some locales, such as New York City, there are housing and apartment shortages now surfacing selectively. In the meantime, we also will be getting a look at the Conference Board's Consumer Confidence Index later this morning, where a modest increase for September is the general expectation.

As to housing, we also will be getting a look at sales of new homes tomorrow morning, where a gain for August is the forecast. Then, Thursday morning will bring the final revision in second-quarter GDP. A growth-rate reading of 1.7%, the same as in the prior revision, is the forecast. Moreover, Thursday will see data on weekly jobless claims and durable goods orders for August. Claims are expected to have fallen in the latest week, while durable goods orders likely retreated last month. Finally, Friday will bring data on personal income and consumer spending for August. Gains in each are likely, while the University of Michigan is scheduled to release its survey on consumer sentiment. Here, a nominal increase is the consensus outlook.

So, after a likely higher opening today on Wall Street, the market and investors will have plenty to think about later today and over the course of the week, which all could affect subsequent trading in this currently overbought stock market. – Harvey S. Katz

At the time of this article's writing, the author had positions in PFE.